Palm plantation sparks rainforest row

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(CNN) -- Indonesia has drafted a plan to create the world's largest oil palm plantation, despite warnings from environmental groups that the result could be devastating.

If completed, a section of rainforest nearly half the size of the Netherlands will be destroyed in the Kalimantan region of Borneo.

Currently 14 of the island's 20 major rivers originate in the region and it is one of only two places on earth where endangered orangutans, elephants and rhinos co-exist.

China has already agreed to pay most of the estimated US$560 million it will cost to convert the area, which the government insists will not harm the environment.

The World Wildlife Fund (WWF) disagrees. It says Kalimantan is located in an area known as the Heart of Borneo, which is the only remaining place in Southeast Asia where forests can be conserved on a massive scale.

WWF's research shows that new species are being discovered in the region at a rate of three per month, making it one of the richest areas of biodiversity in the world.

Dr Mubariq Ahmad, a chief executive director of WWF, says that if the proposed plantation is created, not only will it certainly result in environmental damage but it could also, "have long-lasting, damaging, consequences for the people who depend on the area and its massive water resources, which feed the whole island."

Indonesia currently produces 36 per cent of the world's supply of palm oil, which is a semi-solid substance at room temperature and is used around the world in foods such as margarine, shortening, baked goods and candies.

With a recent past haunted with serious labor issues and an unemployment rate presently at 9.2 per cent, some of Indonesia's leaders and citizens view the new development and the estimated 100,000 new jobs it will create, as a good opportunity for economic improvement.

Derom Bangun, Chairman of the Indonesian Palm Oil Producers Trade Association, is one of those in favor of the proposed plantation.

He said: "Investment should be encouraged provided the environment is taken fully into consideration."

He said despite what organizations such as the WWF believe, IPOPTA is "not only interested in the economic aspects of the business."

In 2002 a pact was signed by NGOs, financiers and farmers promising not to destroy any habitat that is home to endangered species or crucial to a village's water supply.

"We only support the establishment of oil palm plantations that are based on substantial and environmental principles." Said Dr Rosediana Suharto, Executive Chairman of the Indonesian Palm Oil Commission.

His job is to promote a positive image of the Indonesian palm oil industry and he says "consumers do not want to be associated with the destruction of the rainforest."

Opponents including Ahmad believe that a plantation in the mountainous region of Kalimantan would be a reckless investment.

He said: "It doesn't make commercial or conservation sense to rip the forest out of the Heart of Borneo to plant a crop, which cannot grow in mountainous conditions.

Research has shown growing oil palm in areas above 200 meters results in low productivity. Most of the Heart of Borneo area is between 1,000 and 2,000 meters high.